When Little Caesars recently raised the price of their pizza to $ 5 for the first time in 25 years, it garnered a lot of attention.
The 11% increase is not significant considering the overall cost of the pizza now, which is $ 5.55. However, it’s important to note that one of the more popular pizza franchises did.
Little Caesars raises the price of hot, ready pizza for the first time in 25 years
Little Caesars began franchising its stores in 1962 and currently has over 5,000 locations worldwide. As for the prices of the more than 4,000 outlets in the United States, the price is the same. And it allows for consistency across the board so that customers can expect to pay the same amount no matter where they are. This is one of the advantages of having a franchise.
By paying the same amount for supplies, marketing, and other related costs, franchisees save money on their overall operating costs. And that makes it possible to offer pizzas at $ 5 for 25 years without increasing the price. This is one of the perks of having a franchise, but not everyone can afford to get into the more popular franchises like Little Ceasars. But pricing challenges affect all businesses, regardless of size.
Franchisees facing the challenges of inflation, supply chain crisis
There are many factors that go into increasing the price of the products or services you provide to your customers. When it comes to franchises, the price is usually set by the company. It takes the pressure off of justifying the cost increase because the franchise fixes it. However, if you don’t have a franchise and run a small business, price increases can be difficult.
Given the last two years of the pandemic along with rising wages, inflation and supply chain issues, price increases are expected. But finding the right balance is extremely important because you don’t want to scare your customers away. Therefore, you have to use economics to define your prices or your price elasticity.
As a small business owner, knowing how many more products your customers want when the price goes down or how much they want less when the price goes up will give you a better idea of ââwhat price you can set. And that is the elasticity of demand for the products and services provided by your business.
Beyond that, you also need to look at some different characteristics of your products or services. This includes if they have substitutes, is it a luxury or a necessity, how different is it, and finally, who pays for your products?
As a small business owner, you can make changes quickly if you know the price elasticity of the demands for what you offer. The key is to set your prices accordingly to better serve your customers in the long run.